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LA Restaurants Enact 3% Surcharge For Healthcare Costs

On Tuesday, LA Weekly reported that several upscale restaurants in the City of Angels will be adding a 3 percent surcharge to cover their employees' healthcare costs, a trend that has been gaining steam since the Affordable Care Act launched nearly one year ago.

Beginning on September 1, restaurants Lucques, Tavern, A.O.C, and a few offshoots all added a 3 percent surcharge to customers' checks, explicitly stating in a press release their decisions hinged on covering employee healthcare costs.

Lucques Group, Suzanne Goin and Caroline Styne, owners of the restaurants, also named several other restaurant groups that will be duplicating their efforts; Restaurants Rustic Canyon, The Hungry Cat and Melisse were among those mentioned.

In the press release, the restaurant owners made sure to mention the business decision had nothing to do with politics, only business. They stated:

The major point is that this is not a political statement or endorsement of any kind. Our desire to offer health benefits is not tied to the Affordable Care Act, which at this point wouldn’t require businesses to provide health benefits to their employees until January 2016 at the earliest, and where ultimately businesses of our size might not be required to provide health benefits at all. We are doing this because, quite frankly, we believe it’s the right thing to do, and that as a community of independent and family run restaurants we want to provide the best work environment we can so that we can provide long term jobs and careers for our staff instead of the usual transient employment that is associated with the restaurant business.

As to why they don't just raise their menu prices, the owners had this to say:

The cost of offering these benefits is significant and the reality is that restaurants, particularly smaller restaurants like the ones many of us own, have a very high ratio of staff members to revenue and run on very slim profit margins. Successfully run restaurants generally make between 5-10% net profits so a health care benefit which eats away 3% of gross sales will take away anywhere from 30% to 50% of annual profits for a restaurant. We’ve discussed simply raising menu prices, but ultimately food prices are tied in many ways to the ingredients we purchase. Those ingredient costs have increased astronomically recently so we’re already struggling with working creatively to keep menu prices down and don’t feel it’s right to try to factor health care costs into menu prices as well. We’d rather keep our menu costs as an accurate refection of our ingredient prices so that customers know that if we have to raise them it’s because we can’t avoid passing on our increased costs.

This decision comes almost one year after another upscale LA restaurant, Republique, announced they'd also be adding a 3% surcharge for the same reason. Some on Yelp have condemned the restaurants for exercising their rights as a business, calling the move both greedy and misleading, with some vowing never to visit them again.